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Federal Budget Scrutinized by Ag Econmists

Cutting farm programs will have relatively small contribution to reducing spending and deficit.

Apr 12, 2011

The ag economists at the University of Illinois have a brand new article on the federal budget on their Web site. Nick Paulson and colleague Gary Schnitkey wrote the entry titled "Putting Agricultural Spending into Perspective."

Paulson says the two decided to look at how farm spending in the federal budget compares to other types of outlays. They used 2009 as an example year and looked at the actual expenditures.

"Programs like Social Security and defense comprise just under 20% of the budget whereas all USDA programs are between 3% and 4% of total spending," Paulson said. "If you take a look at the farm safety net, a lot of the programs that are under fire in the popular press right now like crop insurance and commodity programs, those actually are less than 1%, around 0.5% of the total budget. So, cuts are expected and they take a lot of heat in the press, but when you look at the overall budget the amount they can contribute to overall spending cuts and reducing the deficit is relatively small."

It's even smaller when looked at under the guise of just the USDA budget, which includes nutrition and consumer spending items along with the farm safety programs. Paulson and Schnitkey found programs like the Supplemental Nutrition Assistance Program and other human nutrition and consumer programs are projected to cost about $100 billion this year and again next year. The farm safety net programs, crop insurance and direct payments, total $16 billion. However, high priced commodities are causing Washington to reconsider the value of such programs. Schnitkey and Paulson make an argument that the programs should be reconfigured for efficiencies rather than eliminated.

"I think rather than just cutting direct payments or removing other commodity programs that we have, I think there are ways that we can make the overall suite of programs we have available more efficient," Paulson said. "Providing the same level of risk management benefits to producers while also spending less taxpayer dollars to do so, and that's something we're going to be looking at in some of the posts we'll be putting up in the next couple of weeks."

For more of Paulson and Schnitkey's work on analyzing the budget impact on farm programs visit the University of Illinois Ag Econ Web site www.FarmDocDaily.illinois.edu.